Solid US hiring in July added 255,000 jobs and lifted pay

2016-08-05 | Christopher S. Rugaber of Associated Press

WASHINGTON (AP) — U.S. employers added a healthy 255,000 jobs in July, a sign of confidence in the economy that will likely ease concerns about signs of weak growth in the midst of the presidential race.

The unemployment rate remained a low 4.9 percent, the government said Friday in its monthly jobs report. Many more Americans began looking for a job, and nearly all were hired. But the influx of job seekers meant that the number of unemployed fell only slightly.

The figures suggest that employers were unfazed by either Britain's late-June vote to quit the European Union or the U.S. economy's tepid growth in the first half of the year: Just 1 percent at an annual rate. Most analysts expect the solid hiring to fuel an economic rebound in the second half of this year, with more paychecks and higher pay fueling spending and growth.

A sharp fall-off in hiring in May, when only 24,000 jobs were added, had spurred fears about an economic slowdown. But job growth roared back in June with a gain of 292,000. July's increase provided further evidence that May's slowdown was likely temporary.

"It puts to bed a lot of the concerns that had risen up after the May report that we had come to a screeching halt in the job market," said Curt Long, chief economist at the National Association of Federal Credit Unions.

Investors appeared pleased by the data, with the Dow Jones industrial average surging about 160 points — nearly 1 percent — in midmorning trading.

Some economists raised the possibility that the job gains will embolden the Federal Reserve to resume raising rates later this year, though perhaps not before December. The Fed raised its benchmark rate from a record low in December last year but has since held that rate steady in the face of economic uncertainty.

"These job numbers are good enough to keep the Fed on track for a December rate increase despite sluggish GDP growth in the first half of this year," said Scott Anderson, chief economist at the Bank of the West.

Average hourly pay picked up in July and is 2.6 percent higher than it was a year ago, matching the fastest pace since the Great Recession officially ended in mid-2009. With unemployment low, some employers are likely being forced to compete with one another for new hires by offering higher pay.

Solid hiring occurred last month across a range of industries, including middle- and high-wage jobs, one factor that likely boosted average pay. Professional and business services, a category that includes architects, engineers and managers, added 70,000 jobs, the most since October.

Financial services added 18,000 and construction 14,000. Government positions rose 38,000, the most in more than a year.

Health care, which includes jobs at all pay levels, gained nearly 49,000 new jobs. Hotels and restaurants added 27,000.

July's robust job gain may be enough to reassure investors — and perhaps Fed policymakers — that the economy will pick up. The sluggish growth it has managed to achieve since last fall has been driven mainly by consumers, who ramped up spending in the April-June quarter at the second-fastest pace since the recession.

One of the most optimistic outlooks for the economy has come from the Federal Reserve Bank of Atlanta: It predicts that annualized growth will reach 3.7 percent in the current July-September quarter.

Public perceptions of the economy have been largely negative during this election season despite low unemployment. A top adviser to Donald Trump said last week that the annual economic growth rate of just 1.2 percent in the April-June quarter was "catastrophic."

Hillary Clinton has tended to credit the Obama administration for rescuing the economy from the Great Recession but has also said "none of us can be satisfied with the status quo."

Other recent economic data have been mixed. Americans are confident enough to step up home purchases, aided by near-record-low mortgage rates. Sales of existing homes reached a nine-year high in June, and sales of new homes accelerated to an eight-year high.

Services companies, which range from retailers to banks to shipping firms, expanded at a healthy pace in July, according to a survey by the Institute for Supply Management, a trade group. Their expansion slowed a bit from the previous month. But new orders picked up, a sign that growth could remain healthy.

But manufacturing continues to struggle and is weighing on hiring. Factories received fewer orders in June for a third straight month. Weak growth overseas and a stronger dollar have cut into many companies' overseas businesses. And auto sales have leveled off, according to data released this week.

The slowdown in manufacturing has cost jobs: Factory employment has fallen about 30,000 in the past year, depriving the economy of key middle-income positions.